Steel rivals Arcelor and Mittal still talking

Luxembourg, Jun 25: Arcelor and arch rival Mittal Steel, the world's two biggest steel makers, talked late on Saturday to try to settle their long takeover battle.

Arcelor's board was due to meet early on Sunday to decide whether to approve an improved offer to Mittal's 23 billion euro ( billion) unsolicited bid or to go ahead with a rescue plan from Russian steel maker Severstal.

Sources close to both companies said on Saturday talks were still in progress about the price Mittal, controlled by billionaire Lakshmi Mittal, would have to pay to win over the board of its takeover target.

New reports said Arcelor would not accept a bid below 40 euros a share.

Corporate governance issues were also under discussion and the sources said there had been progress on these, but there was no guarantee talks would be successful.

''We are progressing, but it's not over,'' one source said. Under the terms of an agreement which are still under discussion, the combined group would be named Arcelor-Mittal and would be based in Luxembourg.

Arcelor chairman Joseph Kinsh would keep his post and both companies would be run separately during a transition period during which Arcelor and Mittal would appoint representatives to their counterpart's board.

Tension has grown among members of Arcelor's management over the negotiations with Mittal and several board members have said they would need binding guarantees from Mittal on Sunday to approve a deal.

A source close to Arcelor said the Luxembourg-based company would give Severstal the opportunity to respond to any raised Mittal offer.

Reporters said they saw Severstal owner Alexei Mordashov entering Arcelor's Luxembourg headquarters on Saturday.

Severstal has secured a multi-billion euro loan facility from investment bank ABN AMRO to give itself firepower to counter any increased Mittal bid with a proposal that would include cash for Arcelor investors, a source said on Saturday.

Severstal revised the terms of its merger proposal this week, saying Mordashov would settle for 25 percent of a new combined Arcelor-Severstal group rather than 32.3 percent and that the revised deal represented a 2 billion euro improvement for Arcelor.

The revised proposal dropped a cash element for Arcelor shareholders in the event of any deal. The ABN AMRO facility will allow Mordashov to re-introduce cash to any new proposal, the source said.

Arcelor said that it would cancel its deal with Severstal if shareholders representing 50 percent of the capital voted against it during a meeting scheduled on June 30.

Minority shareholder group ADAM said the vote was unfair and has asked a Luxembourg court to postpone the meeting.

The court will issue a ruling on Thursday.

REUTERS